COMMISSIONER OF INCOME TAX vs. M/S.CITY UNION BANK LTD

T.C.A.Nos.270 and 271 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 23.08.2022 CORAM THE HON'BLE Mr. JUSTICE R. MAHADEVAN AND THE HON'BLE Mr. JUSTICE MOHAMMED SHAFFIQ Tax Case Appeal Nos.270 and 271 of 2015 The Commissioner of Income Tax Trichy .. Appellant in both T.C.As Vs. M/s.City Union Bank Ltd. 149, T.S.R.Big Street Kumbakonam .. Respondent in both T.C.As Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the common order dated 08.07.2011 passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, in respective I.T.A.Nos.914/Mds/2010 and 915/Mds/2010. For Appellant : Mr.J.Narayanaswamy in both T.C.As Standing Counsel For Respondent : Mr.V.S.Jayakumar in both T.C.As 1/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.270 and 271 of 2015 C O M M O N J U D G M E N T (Judgment was delivered by R. MAHADEVAN, J.) These tax case appeals have been filed by the appellant/Revenue, calling in question the correctness of the common order dated 08.07.2011 passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, in respective I.T.A.Nos. 914/Mds/2010 and 915/Mds/2010, for the assessment years 2006-07 and 2007- 08. 2. By order dated 27.01.2016, this Court admitted the aforesaid tax case appeals along with connected appeals relating to the assessment years 2002-03, 2004-05 and 2005-06 on the following substantial questions of law : “1) Interest on Accrued Securities : Assessment years 2002- 03, 2004-05, 2006-07 and 2007-08: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee need not offer interest on accrual basis and assessee can exclude the interest earned from securities on accrual basis for the purpose of income tax even though the assessee is a banking company bound to follow mercantile system of accounting as per Income Tax Act, Indian Companies Act, RB1 guidelines? 2) Disallowance of deduction under section 36(1)(viia) Assessment years 2002-03, 2004-05, 2005-06, 2006-07 and 2007- 08: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for deduction of bad debts on the total average outstanding rural advances made by the bank at the end of the accounting year without 2/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.270 and 271 of 2015 restricting the deduction to incremental advance made during the year by not appreciating the 2nd limb of section 36(1)(viia) as per which deduction can be allowed only on the incremental advance made during the year? 3) Disallowance of deduction under section 39(1)(vii) : Assessment year 2002-03: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non- rural bad debts written off and debited to reserve account can be claimed as deduction of bad debt under section 36(1)(vii) when only bad debts written off which are over and above the credit balance in the provision for bad and doubtful debts account would alone be eligible for deduction under the section? 4) Cessation of liability on account of state drafts and branch suspense : Assessment year 2004-05, 2006-07 and 2007-08: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that balances lying unclaimed with the bank for more than 3 years cannot be treated as income of the assessee? 5) Depreciation on account of shifting of securities from available for sales category (AFS) to held to maturity category (HTM): Assessment years 2005-06 and 2006-07: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that depreciation is to be allowed on account of shifting of securities from available for sales category (AFS) to maturity category (HTM)? 6) Provision for depreciation on investments under Trading Account: Assessment years 2004-05, 2005-06, 2006-07 and 2007-08 : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for the deduction with respect to the provision for depreciation on Investments under the trading account even though the assessee had valued the closing stock of the investments for the purpose of income tax by ignoring the appreciation in its value and had valued the investments differently in the books of accounts? 7) Amortisation of loss in investment in securities: This issue arises for assessment years 2002-03, 2004-05, 2005-06, 2006-07 and 3/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.270 and 271 of 2015 2007-08: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for deduction of amortization loss/expenses on Government securities classified as Held to Maturity category, without capitalising the loss/expenses over the remaining period of maturity of securities? 8) Share listing fees:Assessment year 2002-03: Whether the facts and in the circumstances of the case, the Tribunal was right in holding that share listing fees is allowable as revenue expenditure and cannot be treated as capital expenditure?" 3. When these matters were taken up for consideration, the learned Standing Counsel for the appellant/Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019, issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in these appeals are less than the threshold limit. 4. In the light of the aforesaid submissions made by the learned Standing Counsel for the appellant/Revenue, the present appeals, wherein, the tax effect is said to be less than the monetary limit imposed, are dismissed as withdrawn, keeping open the substantial questions of law for determination in appropriate cases. No costs. 4/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.270 and 271 of 2015 [R.M.D,J.] [M.S.Q, J.] 23.08.2022

Index : Yes / No gya To 1.The Joint Commissioner of Income Tax Kumbakonam Range, Kumbakonam 2.The Commissioner of Income Tax (Appeals) Tiruchirapalli 3.The Income Tax Appellate Tribunal 'B' Bench, Chennai 5/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.270 and 271 of 2015 R. MAHADEVAN, J. AND MOHAMMED SHAFFIQ, J. gya T.C.A.Nos.270 and 271 of 2015 23.08.2022

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